Bankruptcy trustee targets Catholic schools

What's a parochial education worth in New York City? Nothing, claims a bankruptcy trustee.

In an unprecedented case, trustee Robert Geltzer is trying to claw back roughly $45,000 in tuition money from two Catholic schools: Brooklyn's Xaverian HS and Staten Island's Our Lady of Mt Carmel-St. Benedicta School.

Geltzer is trustee in the bankruptcy case of a Staten Island couple who made the tuition payments for their children.

His lawyers argue that the bankrupt parents received "less than a reasonably equivalent value" in exchange for the tuition, and did not directly benefit.

If Geltzer wins, these cases will open a Pandora's box of claw-back efforts against other private schools, as well as any provider of goods and services to minor children of parents who later file for bankruptcy, experts said.

The next hearing is set for Oct. 17 before Chief US Bankruptcy Judge Carla Craig. The parents' bankruptcy has been discharged, and the children have graduated, but Geltzer continues to administer the estate.

In court papers, the trustee alleges "private school . . . was not reasonably necessary" and was paid for "in blithe disregard of their own insolvency."

"This is contemptible," said Bill Donohue, president of the Catholic League. "Selectively choosing Catholic schools to shake them down is despicable."

In a contentious hearing in July before Chief US Bankruptcy Judge Carla Craig, Geltzer's attorney, Joyce Campbell-Priveterre of the law offices of Daniel Gershburg, alleged that the tuition payments were "constructive fraud" partly because "it's religious education, religious formation," according to a transcript obtained by The Post.

But Craig seemed dubious.

"How about braces . . . for your kid? There's no legal requirement to provide orthodonture," Craig said. "Are you going to . . . sue the orthodontist? . . . Are you going to sue Disney World?"

Xaverian's attorney, Fred Stevens, argued that it is "overwhelmingly clear" that the parents benefitted from the tuition money. Stevens and Our Lady of Mt. Carmel's attorney, Benjamin Feder of Kelley Drye & Warren, said Geltzer seemed biased against the parents for choosing parochial schools.

"One almost gets a feeling that he's personally offended . . . that the debtors sent their children to a parochial school," said Feder at the hearing, adding, "The trustee is not empowered to pass judgment on . . . the necessity of a given expenditure."

As a Chapter 7 trustee, Geltzer has a duty to maximize the value of the estate and pay creditors, after collecting a commission.

But bankruptcy law experts contacted by The Post were stunned by his current effort to recover money parents spent on minor children.

"It's a highly unusual claim, and one I've never heard before," said Chris Graham, an adjunct bankruptcy professor at St. John's School of Law. "Education is very valuable."

The couple and Daniel Gershburg declined to comment.

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